Cracking the shell: Inside Newegg’s east coast distribution center

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All of the different products the company carries are sorted both by category and how easy they are to move: Obviously, HDTVs are more cumbersome and difficult to remove safely than processors. Some mobile equipment, such as laptops, netbooks, and tablets, are stored in a special “high-value” area behind a chain-link fence that’s been erected within the warehouse itself. (I checked: It’s not electrified.) Forklifts dart back and forth, moving various pallets of items to other, more useful places; even when you walk through mausoleum-like corridors, surrounded by yards of boxes thrusting into the air like makeshift skyscrapers, the entire place feels energetic and alive. My press contact described the atmosphere as one of “walls of RAM and madness,” and he’s not far off.

That’s true of the order-fulfillment process as well. If you’ve ever worked in a mail room environment or have ever had to cart a big box to the post office, you know the drill. The Edison warehouse takes care of everything, start to finish. Cardboard boxes, in six sizes, are constructed on the premises; on the tour, I constantly passed towering stacks of ones that had been assembled in anticipation of the holidays. Then they’re filled with products from consumers’ orders, as well as crumpled brown paper for additional protection (this more environmentally friendly solution replaces the Styrofoam peanuts Newegg used for years; the giant bins that once housed those by the hundreds of thousands can still be seen lining the walls). Finally, the orders are shipped out, via any of four different carriers: the U.S. Postal Service, UPS, FedEx, and DHL. Products that are shortly to be used in one of Newegg’s well-known deals have a home, too, in the loading dock, where they’re easily accessible.

Lee’s description of what’s involved in filling an order made that sound like the most fascinating part of what happens in Edison — and it’s the one most likely to be of particular interest to system builders, or anyone who frequently buys hardware from Newegg. It unfolds more or less like this:

When you place an order for relatively small products (such as components — even a modest display would probably be too big), the contents of your order are translated into bar-code form and affixed to the side of a red bin, or tote (to use the floor’s lingo).

The bin is then placed on the conveyor belt, where it wends its way through the warehouse, and is automatically scanned at several points along its journey.

If one of those scanners determines that the order on that tote can be filled by the products on the nearest set of shelves, it is diverted to that area.

The worker in that section scans the tote again, and that information is transmitted to the packing station’s shelves. LED displays beneath each product tell the worker at a glance how many of which product is needed; the worker then adds the product to the tote and repeats until all the necessary products from that station are included. (Newegg calls this its “Pick to Light” system, or PTL.) For example, if the display next to a CPU cooler says “A 3,” the worker knows that the first tote in line needs three of those units.

Once the worker has added as many products as possible to the tote, he or she moves the tote back to the main conveyor so it can continue to the next station. Once the tote contains all the items necessary to complete the order, it’s fast tracked to the two-person packing station, where one worker verifies that all the proper products are included and the second adds the packing material, seals the box, and sends it on to the appropriate carrier.

Did you happen to catch what sort of software they were using to power their supply chain?

Anonymous

How does the process change when you pay the $2.99 to RUSH the order? I’ve always wondered what RUSH would do for you.

http://www.mrseb.co.uk Sebastian Anthony

There’s a response to your comment further down.

Alan Post

In the past, rush shipping would give you a specially colored bin, that basically got to cut in line to get to the pickers.

Anonymous

Ive never paid for rush processing and I usually get an email in 45 minutes saying my order has been completed and shipped. Cutting that down to 10 minutes don’t seem worth it, especially when Im getting lower end stuff with free shipping already.

Albert Giuiano

Nice article, how many people remember where Newegg came from, the writer identifies it as “New” company in 2001-2002. It used be called Egghead Computers in NY and have stores in my area, they were in direct competition with Compusa. Once they dropped the storefront the company tookoff, and where is Compusa? All but 1 or 2 are left in my state and nowhere near me. I’ve been with newegg for along time now. Tried Tigerdirect recently and I have to say they have the most ass-backward Account history system, they should take a look at newegg setup and then they might be ready for primetime….

http://www.mrseb.co.uk Sebastian Anthony

I thought I’d heard the Egghead/Compusa story before… but never in detail. Thanks for the comment :)

Anonymous

Actually, Egghead software was purchased by Amazon and the egghead.com url points to amazon software.

http://twitter.com/aprobotics Shaun Meehan

haha, it looks like the center new “egg” cracked and is leaking down the fasade.

Joe S.

Since my first purchase of two video cards back in 2001 (needed one for me & one for
my wife) I’ve been a regular customer of Newegg. Gladiac Gforce i4200s? While
Newegg is not perfect but their system, from their web design to pricing to
fast shipping, forced every other online retailer to up their game. Tiger
Direct has it’s problems, but they are twice the company they once were. If
they had not upped their game, they woulda gone the way of CompUSA, Computer
City & many others. Even Buy.com has amazing service (now) & I give
credit to Newegg for that.

Again,not that Newegg is perfect. Their return policy on monitors (bad pixel policy)
sucks & forces me to look elsewhere for monitors. They still charge a
restocking fee on RMAs of DOA product (when returning & not exchanging).
They will refund it but you have to go the extra step & ask.

At least they brought back posting the shipping cost right up front again. For a while
they hid it until it was in your cart, a real pain on multiple purchases.

All in all though they are my favorite place to “window shop” & buy. Not a complete fanboy, I buy from a lot of retailers, online & in person, but they are still IMO the best.

Anonymous

The packing and shipping side of the business is well streamlined.
What you guys don’t see is the other side of the business – procuring product.
Contracts Newegg force suppliers and manufacturers to sign giving so-called “first nation’s rights” is unethical, at best. This is how they get an edge over other resellers.

Anonymous

phlpn.es/7x9vmd

http://twitter.com/bufbarnaby Joe

I prefer Indiana…Amazon !

Anonymous

Very cool. Nice to see the insides of where we’ve been ordering from all these years (I’m on East coast). And VERY similar warehouse fulfillment process to where I work (pharmacy distribution center)– conveyor totes, barcoded for picking and filling (separate multiple work stations for each), then matching the tote to the appropriate shipping carrier/destination. Trust me, this could not be possible without computers & barcode label printers– which means you MUST have backups for all that warehouse equipment, on the premises for immediate replacement, not sitting in another warehouse in a “remote” facility somewhere. Otherwise the whole operation comes to a screeching halt for a minimum 24 hours. FYI to all you prospective operations managers out there reading this.

Charles Beck

Now that Newegg has gone from computer/electronic merchandise only to general merchandise I wonder if all the new stuff (lawn chairs, electric drills, etc.) are distributed from these same three centers as the computer/electronic stuff. I would assume that they had to expand their facilities.

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